"Cold Reading" is actually a bunch of techniques + intent. The intent is to defraud or take advantage of others. Take away the intent and you have some really useful skills for helping people discover what is really important to them, and things they don't realize they already know.
Many of the basic techniques are also used by psychological and criminal investigators. Novelist Jeffrey Deaver has created a main character who appears in his latest thriller and is characterized as a "human lie detector." He includes an appendix in which he gives his sources among criminologist training manuals.
Unfortunately, we don't have a good term for the use of the underlying, observational and communication techniques as they are used in fortune-telling and, indeed, in almost all sensitive, empathetic human communications. Thus, the slightest hint of these techniques wrongly condemns the user.
In fact, you can read a bitter article by Karla McLauren, "a former New Age practitioner," who, after writing and publishing 9 popular books in the field, went over to the side of the sceptics. She explains:
"I didn't understand that I had long used a form of cold reading in my own work! I was never taught cold reading and I never intended to defraud anyone; I simply picked up the technique through cultural osmosis."
http://www.csicop.org/si/2004-05/new-age.html
For some reason she got herself into a born-again all-or-nothing quandry, without realizing that this is part of how we-as-humans communicate.
For myself, I try to be very aware of when I am "picking up" information from a querent, and I tell them exactly what I have observed. I call this being "transparent" in a reading. My intention is not to convince anyone that I am psychic or have a hotline to some inner wisdom (even if that's sometimes so), but to help the person get as quickly as possible to a vital issue and to help them recognize what they already know regarding it. The reading can, in addition, be a place to "try out" options and choices in the imagination that they hadn't yet considered.
P.S. Just found McLauren's latest website (since getting her degree in sociology) in which she seems to have come around to a more balanced way of thinking:
"I've found in my research that the skills I and other psychics have ARE understandable from a scientific and rational standpoint. Intuition is real, and it doesn't have to be paranormal in order to be fascinating and valid. . . . it is very natural to think that strong empathic (or intuitive) abilities are magical. They're not. And they don't need to be."
http://www.emovere.com/where.htm
(BTW, I took a workshop in psychic self-defense from McLauren around the time that she must have been writing her sceptics article. Something strange was going on that I couldn't figure out. Now it makes sense.)
I've already addressed some of the concrete sides of intuition on my Tarot Blog and plan to talk more about psychic development later.
I think it's very important for us to understand what "cold reading" is really about.
Mary